Why do we care about the unbanked when we talk about mobile financial services?
There are 70 million unbanked (28 million) and under-banked (45 million) customers in the US. 73% of them predominantly use cash. Still, these folks are in need of financial services like the ability to remit money back home, cash checks, the ability to grow credit history to purchase a home, etc. The alternatives available to them come at a premium or don’t exist at all. This is where mobile financial services come in….
Here are some fascinating statistics…
- 58% of the unbanked in the US have college degrees
- The US has the highest % of immigrants with no savings account in the world
- A recipient of remittance in Mexico is more likely to have a bank account than the sender
- Most unbanked consumers VOLUNTARILY opt out of the financial system
- Most are employed, but 58% earn less than $28k per year
- Hardly any of them use prepaid cards
Why do they opt out?
The following reasons were recently cited by Edgar Dunn:
- Not enough money to put into an account and can’t justify the fees
- Never thought of opening a checking or savings account
- Only use cash, so don’t need one
Other reasons cited by Dr. Manuel Orozco are the following:
- Suspicious of Banks: A 2002 study of remittance senders by the Pew Hispanic Center and the Multilateral Investment Fund of the InterAmerican Development Bank found that many immigrants fail to understand and are suspicious of bank pricing structures.
- Lack of Proper Documents: The study also found that until the Mexican Matricula Consular became widely accepted by banks, lack of proper identity documents was an important factor and remains so for immigrants of other countries.
- Word-of-Mouth Referrals: Finally, the study showed that many immigrants are passive consumers who rely on word-of-mouth referrals in choosing financial services rather than a systematic exploration of the available options (Suro 2002).
- Belief in Temporary Residence: Another important reason why many immigrants do not have bank accounts is because they believe they will return home soon. Yet in the case of Mexican immigrants, the average length of residence in the U.S. is more than 10 years (Bendixen 2001; Townsend 2001).
Back to the puzzle I had laid out a few months ago. How to “bank” the unbanked and offer them meaningful financial services?
Address these concerns, and you may just have something…